Tax Update on 23 June 2026 and L-Day on 13 July 2026 set out a multitude of policy announcements, consultations and draft legislation for the next Finance Bill. Our experts highlight the key measures for in-house remuneration teams.
From 6 April 2027, companies no longer need separately to notify HMRC when granting employees EMI options. Instead, a company will be required to report details of the grant of options through the EMI annual return.
Removing the need to make two separate notifications will significantly ease the administrative burden for companies who operate EMI schemes and grant regular options. In addition, it should reduce the risk of unintentionally losing EMI tax advantages due to administrative oversights or delays in filing a separate notification to HMRC.
Companies should ensure they keep adequate records of the EMI options granted during the tax year and set reminders to submit their end of year return on time.
From 6 April 2027, employers will need to report certain BIKs (namely medical benefits, company cars, vans and car/van fuel) through payroll software and tax will need to be deducted in real time. Employers will no longer be able to report these BIKs after the end of the tax year using Form P11D.
From 6 April 2028, most remaining BIKs (except for employer provided loans and accommodation) will similarly be mandated to payroll. Mandatory payrolling for employer-provided loans and accommodation will be confirmed at a later date.
The purpose of the changes to BIK reporting is to improve, simplify and modernise the taxation of BIKs. Employers should note this technical change in BIK reporting and start thinking about how to implement these new measures by 6 April 2027.
A recent consultation sought views on the proposed approach to align NICs recovery and repayment rules more closely with those applying to income tax.
Currently, NICs and income tax are subject to different recovery and repayment frameworks. To recover unpaid income tax, HMRC must issue an assessment within 4 years (extended to 6 or 20 years in cases of carelessness or deliberate error) or 12 years for offshore matters. Once an assessment has been made, there is no time limit on how long HMRC has to recover the unpaid tax; whereas, because NICs are not subject to assessment in the same way as income tax, unpaid NICs are ordinarily only recoverable by HMRC for 6 years.
Similarly, in cases where tax has been overpaid, taxpayers can claim a refund for most NICs (except Class 4) within 6 years after the end of the relevant tax year, whereas a claim for a repayment of income tax must be made within 4 years.
These differences between income tax and NICs create complexity and administrative burdens for both HMRC and taxpayers, especially where both NICs and PAYE liabilities arise from the same underlying income. Although aligning NICs with the income tax recovery and repayment rules would mean shorter time limits in most cases, it is likely to make the process simpler and easier to apply.
Individuals and employers who pay NICs, representative bodies, agents and other stakeholders should consider responding to the consultation. Responses should be sent by 12th October 2026.
As previously announced at the Autumn Budget 2025, the Government is consulting on accelerating income tax payments by moving to regular in-year instalments. How this is achieved depends on whether the taxpayer has a source of income that is already subject to PAYE.
No changes are proposed for these taxpayers.
Individuals with only non-PAYE income are currently required to submit ITSA returns and make payments on account (PoAs) of the estimated tax liability, unless they fall below certain de minimis thresholds. Taxpayers pay 50% of the estimated tax by 31 January in the relevant tax year, and 50% by 31 July following the end of the tax year. Any remaining balance is settled through a balancing payment on the following 31 January.
The consultation proposes moving to monthly or quarterly PoAs from April 2029. These would be payable in the same tax year as the income is earned, meaning the first payment in April 2029 would be either 1/12 or 1/4 of the estimated total income tax liability for the tax year 2029-2030.
Currently, individuals with both PAYE and non-PAYE income (for example, employees who also rent out properties, who receive interest or dividends, or who earn self-employment income from a “side hustle”) are also generally required to submit ITSA returns and may be required to make PoAs if less than 80% of their income is PAYE income. In some circumstances, these employees can already choose to have certain ITSA liabilities collected through PAYE.
The consultation proposes making this mandatory: all income tax in respect of these employees would be collected through PAYE, provided the employee has sufficient PAYE income. In the same way as for taxpayers without PAYE income, the amount due each month would be based on the estimated total income tax liability for the year, with that estimate based on the previous year’s liability.
Where PAYE income is insufficient to collect the full ITSA amount due in a month, any excess would need to be paid separately by the employee. The consultation seeks views on removing restrictions on the amount of tax that may be collected through PAYE (currently 50% of relevant income) or permitting taxpayers to elect for income tax to be collected through PAYE or direct debit.
While these changes would not increase the overall tax due from individuals for a tax year, they will increase the amounts collected by employers through PAYE. More significantly, the changes are likely to require significant flexibility in payroll systems:
The consultation closed on 4 August, with a Government response expected at Autumn Budget 2026. If implemented, which we consider likely, the first payments would be due in April 2029, in relation to the 2029-30 tax year.
A new Call for Evidence seeks views on how PAYE Settlement Agreements operate in practice. It invites submissions on how employers decide what to include, how employers interpret the current rules, and whether there are any complexities and uncertainties in the current rules that cause difficulties.
The Call for Evidence does not set out any concrete proposals at this stage, but will inform a Government decision on whether reform is needed.
Responses should be sent by 15 September 2026.
The Government is also looking at two existing administrative concessions relating to directors and employees based abroad.
HMRC currently operates a concessionary practice where it permits non-resident directors to be able to carry out limited UK duties (such as attending board meetings) in the UK without incurring a NICs liability. This is set out in the National Insurance Manual at NIM12013. The Government has confirmed that it will legislate to formalise this position.
The Government will also consider its approach to an existing NICs easement that allows certain employees posted in a country with no social security agreement to return to the UK for short periods without needing to pay additional class 1 NICs. No formal proposals have been made, but the Government has stated that it will work with stakeholders on providing further clarity in due course.
The Government has announced a review of the Benchmark Scale Rates and Overseas Scale Rates, which employers may elect to use as flat rates for reimbursing certain expenses for employees travelling for work in the UK and overseas.
Remuneration teams should take steps now to ensure that internal processes are in place in time for the changes from April 2027 onwards. Businesses should also consider whether they wish to respond to any of the consultations or calls for evidence, whether directly or indirectly (through industry bodies or advisers such as Addleshaw Goddard). If you wish to speak to our experts about any of the measures announced, please get in touch.
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